Magazine article Workforce Management

Sec Rule Change Forces Firms to Redo Numbers

Magazine article Workforce Management

Sec Rule Change Forces Firms to Redo Numbers

Article excerpt


Even before the Securities and Exchange Commission finalized its rules on executive compensation disclosure last summer, most companies had scurried into action, preparing to provide greater transparency into salaries and perks.

But now a late-December change in the regulations means those companies are going to have to redo a lot of work they had already completed.

The disclosure rules, which force companies to reveal their top five executives' total compensation along with a detailed explanation of how those packages are determined, require HR executives, compensation consultants and boards of directors to spend numerous hours drafting new tables that lay out the information.

"This is a long process," says Steve Van Putten, East region practice leader for executive compensation at Watson Wyatt Worldwide. "It takes several meetings just to explain all of the changes to the compensation committees."

Given that, many firms were probably annoyed when late in the afternoon of December 22, the SEC announced a change in the rules. Rather than having companies disclose stock option values as they are granted, the revised rule requires firms to disclose options values as they vest.

Under the initial rules, for example, if an executive received $100,000 that vested over four years, the company would have to disclose the entire $100,000 in the summary compensation table. Now, they will report $25,000 every year for four years.

The SEC made the change last month to be more in line with accounting rules, which require companies to expense stock option grants in their financial statements as they vest, the agency said in a release.

Most companies are pleased with the rule change because it provides a more accurate picture of what they are actually paying out in a given year, consultants say. Even so, many are probably irritated at the timing of the announcement, says Mark Borges, a principal at Mercer Human Resource Consulting and a former SEC attorney. …

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